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Eligibility


oldman
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I agree that the plan can use the 1,500 hours of service because IRC §§410©(1)(A) and 411(e)(1)(A) exempt governmental plans from the eligibility and vesting rules of ERISA.

Another question concerning this plan. Plan covers all employees, who are required to contribute employee contributions of 3% of compensation that are "picked up" by the employer and matched by the employer. Employer wishes to exclude part time employees from participating in the plan going forward.

I believe the plan can be amended to exclude part time employees from participating in the employer matching contribution feature of the plan. However, the employees must continue the pick up feature. It appears the pick up amount cannot be changed or modified. Revneu Ruling 81-35, 1981-1 C.B. and 81-36, C.B.255 address certain requriements for contributions to be picked up by an employer within the meaning of §414(h)(2). These Revenue Rulings establish that the following criteria must be satisfied: (1) the employer must specify that the contributions, although designated as employee contributions,are being paid by the employer in lieu of contributions by the employee; and (ii)the employee must not be given the option of choosing to receive the contributed amounts directly instead of having them paid by the employer to the plan. The feature must not allow for a cash or deferred arrangement ("CODA").

Would you agree that excluding part time employees and allowing them now to now receive contributed amounts directly instead of having them paid to the plan would violate Revenue Rulings and result in CODA feature, possibly disqualifying the plan?

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I agree that the plan can use the 1,500 hours of service because IRC §§410©(1)(A) and 411(e)(1)(A) exempt governmental plans from the eligibility and vesting rules of ERISA.

Don't forget to read 410©(2) and 411(e)(2).

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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